Aug 15 2024: Asian equities were steady on Thursday, while the dollar softened amid lower U.S. Treasury yields. This follows mild consumer inflation data, which has bolstered expectations that the Federal Reserve might begin cutting interest rates next month.
Regional markets mirrored Wall Street’s gains, with Japan’s Nikkei rising 0.8% as of 0540 GMT and Australia’s benchmark up 0.14%. Japanese stocks received an additional boost from data showing a strong economic rebound in the second quarter.
Chinese blue chips added 0.7%, supported by anticipations of further stimulus from Beijing in response to another set of weak economic data. Conversely, Hong Kong’s Hang Seng Index slipped 0.2%.
U.S. S&P 500 futures were up 0.16%, following a 0.4% gain in the cash index on Wednesday, driven by the slowest rise in consumer prices in over three years. Pan-European Stoxx 50 futures increased by 0.38%.
TD Securities analysts noted, “The report ‘checked the box’ for the Fed to initiate rate cuts in September.” They anticipate a 25 basis-point cut but acknowledge that a 50 basis-point reduction remains a possibility.
The dollar remained weak, having dropped overnight to its lowest level against the euro since late last year. The euro was stable at $1.1012 after reaching $1.10475 previously.
The 10-year Treasury yield edged up slightly to 3.83% in Asian hours, after dipping to 3.811% on Wednesday. TD Securities analysts commented, “The USD appears undervalued amid accumulating global risk events,” and expressed caution about a potential correction, continuing to favor a long USD position.
Traders expect the Fed to cut rates on September 18 for the first time in 4.5 years, though opinions are divided on whether the reduction will be 25 or 50 basis points. Slowing inflation but persistent signs of stickiness have reduced the odds of a larger cut from 50% to 37.5%.
Later on Thursday, U.S. retail sales data will provide a critical macroeconomic test. Tony Sycamore, a market analyst at IG, warned, “A negative retail control sales figure could raise concerns about a potential U.S. recession.”
The dollar eased 0.1% to 147.12 yen, maintaining its week-long consolidation around the 147 mark. Sterling remained subdued following softer-than-expected UK inflation data, which suggested deeper Bank of England rate cuts. The pound edged up 0.1% to $1.2843 after a 0.3% decline on Wednesday.
The Australian dollar gained 0.36% to $0.6620, recovering from earlier losses due to a surprising increase in employment, which offset weaknesses in key commodity prices.
Gold inched up 0.2% to $2,453 per ounce after a 0.7% drop on Wednesday.
Oil prices were largely unchanged following previous losses, attributed to an unexpected rise in U.S. crude inventories. Brent crude futures remained flat at $79.81 a barrel, while U.S. West Texas Intermediate crude edged up 0.1% to $77.06. Both benchmarks fell over 1% on Wednesday.
